University of Arkansas at Little Rock Law Review University of Arkansas at Little Rock Law Review

Volume 5 Issue 3 Article 1

1982

Coercion in Contract Law Coercion in Contract Law

E. Allan Farnsworth

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Recommended Citation Recommended Citation E. Allan Farnsworth, Coercion in Contract Law, 5 U. ARK. LITTLE ROCK L. REV. 329 (1982). Available at: https://lawrepository.ualr.edu/lawreview/vol5/iss3/1

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UNIVERSITY OF ARKANSAS AT LITTLE ROCKLAW JOURNAL

VOLUME 5 1982 NUMBER 3

COERCION IN CONTRACT LAW*

E. Allan Farnsworth **

It was suggested that I might discuss the Restatement (Second)of Contracts, which was published less than a year ago.' Ratherthan deal with the Restatement Second as a whole, however, Ithought it wiser to confine these remarks to some aspect of contractlaw and to deal with the impact of the Restatement Second on thataspect. I have chosen as a subject coercion, an aspect of contract lawthat is of central importance in a society that depends as heavily asdoes ours on individual choice. For the larger the role accorded toindividual choice, the greater the significance of coercion incontracting.

The common law treats claims of coercion in contracting underthe heading of duress. Over centuries, the law of duress has gradu-ally been liberalized so that it is more broadly applicable. As theSupreme Court of Arkansas expressed it in 1938, there is "a progres-sive tendency toward a more liberal consideration of causes thatwould tend to avoid a contract" for duress. 2 I plan, first, to tracethat "progressive tendency" as it is reflected in the Restatement Sec-

* This article is based on a Ben J. Altheimer Lecture, delivered on January 29, 1982.

Parts of it are adapted from Farnsworth on Contracts (Little, Brown & Co. 1982) and arereproduced with permission of the holder of the copyright, E. Allan Farnsworth.

** Alfred McCormack Professor of Law, Columbia University.1. Justice Robert Braucher was Reporter for roughly the first half of the project and

the author was Reporter for the remainder.2. Perkins Oil Co. v. Fitzgerald, 197 Ark. 14, 26-27, 121 S.W.2d 877, 883 (1938). The

Arkansas Supreme Court recently has been critical of Perkins, saying that "it must be shownthat there was a threat of some grievous wrong to establish duress." Sims v. First Nat'l

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ond, and, second, to say a few things about the impact of thesechanges on allied areas of the law. Let us begin with an examina-tion of the requirements for a claim of duress. Duress may takeeither of two forms: physical compulsion or threat.

Suppose that I put a pen in your hand and by sheer physicalforce move your hand so that it produces your signature on a con-tract with me. You are, in the picturesque phrase sometimes used, a"mere mechanical instrument" and your act (if we can call it "youract") does not result in a contract.3 But such cases of duress byphysical compulsion are rare, and I shall not discuss them further.Let us turn our attention to duress by threat.

Suppose that, instead of holding your hand and moving it byforce, I tell you that if you do not sign a contract with me I willbreak your arm. You believe, with good reason, that I mean what Isay and that I can do it. Seeing no other way out, you sign thecontract. This is duress by threat. In contrast to the case where Imoved your hand by physical force, your assent is effective to giverise to a contract. But it is a voidable contract--one that you canavoid ("rescind") if you reasonably promptly indicate your inten-tion to do so and offer to make restitution of anything that you havealready received from me under the contract. On avoidance, youare no longer bound by the contract and you are entitled to restitu-tion of anything that I have already received from you under thecontract. Needless to say, such cases of duress by threat ofphysicalharm are almost as rare as cases of duress by physical compulsion.Of more practical interest are cases of duress by threat of economicharm.

For example, consider the following facts, taken from AustinInstrument v. Loral Corporation,' decided by the Court of Appealsof New York in 1971. A general contractor was awarded a six mil-lion dollar contract by the Navy for the production of radar sets. Itthen made a contract with a subcontractor to supply components.

Bank, 267 Ark. 253, 260, 590 S.W.2d 270, 275 (1979). But this was said in a case of a threatby a third person.

3. See RESTATEMENT (SECOND) OF CONTRACTS § 174 (1981) ("conduct . . . physi-cally compelled by duress . . . is not effective as a manifestation of assent").

4. 29 N.Y.2d 124, 272 N.E.2d 533 (1971). The facts of the case have been simplifiedhere. Austin's threat came when Loral, having been awarded a second contract by theNavy, told Austin that it would be awarded subcontracts only for those components forwhich it was the low bidder. Austin's threat was to stop delivery on the first subcontractunless it was given price increases under that subcontract and also awarded a subcontract forall the components required by Loral's second Navy contract. Loral made no claim on thesecond subcontract.

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Soon after the subcontractor began delivery, however, it threatenedto stop delivery unless the general contractor agreed to substantialprice increases on the subcontract. The subcontractor did stop de-livery, the general contractor was unable to find a substitute source,and it finally acceded to the subcontractor's demand. After the sub-contractor had performed, the general contractor sued the subcon-tractor to recover $22,250-the total of the price increases that thegeneral contractor had paid under the subcontract. The Court ofAppeals held that these facts made out a claim based on duress bythreat.

What does a claimant need to show in order to succeed on atheory of duress by threat? The Restatement Second suggests fourrequirements.' First, there must be a threat. Second, the threatmust be of a kind that the law condemns. Third, the threat mustinduce the victim's manifestation of assent. Fourth, the threat mustbe sufficiently grave to justify the victim's assent.

First, what is a threat? Though the Restatement Second at-tempts no definition, it may be of interest to consider that questionin passing here. To begin with, a threat is a manifestation of anintent to do or not to do something in the future ("I'll break yourarm" or "I'll break our contract"). But apromise is also a manifes-tation to do something in the future. Suppose a contractor says to alandowner, "I'll build the house." That is a promise. How does athreat differ from such a promise? Ordinarily, at least, a significantdifference between a threat and any other statement of intention isthat a threat manifests an intention to do or not to do something thatis less desirable from the promisee's point of view than if the alter-native were the case. Suppose that after the landowner has gottenthe contractor to agree to build the house, the contractor says, "I willnot build the house." You would call that a threat because his notbuilding the house is less desirable from the landowner's point ofview than his building it. Or suppose I say, "I'll give you a kiss."You might well ask, "Is that a threat or a promise?" And I wouldsay that the answer depends on you: I have made a statement ofintention, and whether it is the kind of a statement that is describedhere as a threat depends on whether my kissing you is less desirablefrom your point of view than my not kissing you. 6

5. See RESTATEMENT (SECOND) OF CONTRACTS § 175 (1981) ("If a party's manifesta-tion of assent is induced by an improper threat by the other party that leaves the victim noreasonable alternative, the contract is voidable.").

6. For a discussion of the view that a promise to do something involves not only astatement of intention to do it, but also of an intention to undertake to do it, see Raz,

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We are not interested in threats in the abstract, however, butonly in threats used to coerce someone else to make a contract. Thiskind of threat is conditional on the recipient's not giving his assentto a contract. For example, suppose that, after the contractor hasagreed to build a house for the landowner for $100,000, the contrac-tor says, "I won't build the house if you don't promise to pay me$150,000" ("I'll break the contract if you don't promise to pay me anextra $50,000"). The contractor has made a conditional threat-akind of conditional promise. But an offer is also a kind of condi-tional promise. How does the contractor's conditional threat differfrom an offer?

The answer seems simple. When, at first, the contractor said,"I'll build the house if you promise to pay $100,000," that was anoffer because it was a promise, conditional on the landowner's con-senting, to take a course of action (build the house) more desirablefrom the landowner's point of view. But when, later on, the contrac-tor said, "I'll not build the house if you don't promise to pay$150,000," that was a threat, conditional on the landowner's notconsenting, to take a course of action (not build the house) less de-sirable from the landowner's point of view.

But is there really a difference? Does not every offer involve amore desirable and a less desirable alternative? When, at first, thecontractor said, "I'll build the house if you promise to pay$100,000," he also said by implication, "but I will not build thehouse if you do not promise to pay $100,000." (If he was not sayingthis by implication, he would not be bargaining, would he?) Andwhen, later on, the contractor said, "I'll not build the house if youdon't promise to pay $150,000," he also said by implication, "but Iwill build the house if you promise to pay $150,000." (If he was notsaying this by implication, he would not be coercing, would he?) So,is not the contractor making essentially the same kind of proposal inboth situations?

Surely the form of the statement cannot make a difference. Ofcourse it is usual for what we call an "offer" to emphasize entice-ment and for what we call a "threat" to emphasize intimidation.But the contractor's offer would be no less an offer if he said, turning

Promises and Obligations, LAW, MORALITY AND SOCIETY (P. Hacker & J. Raz ed. 1977).For a discussior of threats and promises, see P. ATIYAH, PROMISES, MORALS, AND LAW 157-60 (1981). The Jiscussion there, however, is mainly concerned with whether it is possible toconceive of circumstances in which a threat that would not commonly be regarded as anoffer can nevertheless create an obligation with regard to the action threatened-a questionwith which I am not here concerned.

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it around: "I will not build the house if you do not promise to payme $100,000, but I will build the house if you do promise to pay me$100,000"-and added-"You will never get another chance at aprice as low as this." Every offer involves a threat of this kind. Norwould the contractor's threat be any less a threat if he said, turningit around: "I will build the house if you promise to pay me$150,000, but I will not build the house if you do not promise to payme $150,000"-and added-"I hope that you will take advantage ofthis good opportunity for you." Every threat involves an offer ofthis kind. Nothing is gained by attempting to distinguish offersfrom threats for the purposes of the law of duress.' Since a claim ofduress can only succeed if the threat was one that the law condemns,the significant task is not to distinguish offers from threats but todistinguish those threats that the law condemns from those that itdoes not condemn.

What kinds of threats does the law condemn?' The first casesto recognize claims of duress involved threats of physical harm ("Iwill break your arm"). Later cases included wrongful detention ofgoods ("I will retain your Rembrandt").9 In these early cases theaction threatened was ordinarily a crime or at least a tort, and it wasnatural to characterize the threat itself as "unlawful," or at least as"wrongful." But now that the doctrine of duress has been liberal-ized to include cases of economic duress, where the threatened act isneither a crime nor a tort, it seems preferable to ask not whether the

7. Since the law of duress gives legal consequences to a threat only if it is improper, thecharacterization of a proposal as a threat has no legal significance unless the threat is charac-terized as improper. In other words, the law does not distinguish an offer that is not a threatfrom a threat that is not improper. On the distinction sometimes drawn in philosophy be-tween an offer and a threat, see infra note 21.

8. At this point a digression concerning "warnings" is in order. Consider these factsbased on a recent Florida case. An employer said to an employee, "I am going to fire you."The employee, who was seeking another job, asked, "May I quit first," the employer said,"Yes," and the employee resigned. The employee later claimed that her resignation hadbeen obtained by druess-a threat to fire her. The court held, however, that there was noduress, noting that the employer had not said "Quit or be fired," but that the employee hadraised the possiblity of resignation. City of Miami v. Kory, 394 So. 2d 494 (Fla. Dist. Ct.App. 1981).

The decision seems right because the concern of the law of duress is with threats used toinduce someone into making a contract and here the employer did not say "I am going tofire you" in order to induce the employee to resign. Philosophical discussions of coercionsupport this by distinguishing warnings from threats. See, e.g., Nozick, Coercion, in PrnLOS-OPHY, POLITICS & SOCIETY 101, 120-27 (1972). RESTATEMENT (SECOND) OF CONTRACTS§ 176 comment c (1981) concurs.

9. The seminal case on duress of goods was Astley v. Reynolds, 2 Strange 915, 93 Eng.Rep. 939 (K.B. 1732) (detention of pawned plate until excess interest was paid).

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threat was "illegal" or "wrongful" but whether it was "improper,"the term adopted by the Restatement Second.10 Yet the line thatseparates improper threats from legitimate bargaining is not alwayseasy to draw. The difficulty is hinted at in what may be the mostnotorious threat in contemporary prose. When Johnny Fontaneprotested, "This guy is a personal friend of J. Edgar Hoover ...You can't even raise your voice to him."-"He's a businessman,"the Don said blandly, "I'll make him an offer he can't refuse.""

Some kinds of threats are plainly improper. A threat to dosomething that is a crime or a tort is an obvious example. Some lessobvious examples are listed in the Restatement Second.1 2 One ofthese, mentioned earlier, is a threat to break a contract. Such athreat is improper, but only if it "is a breach of the duty of goodfaith and fair dealing" under the contract with the victim. 13 In ex-plaining this category, the commentary to the Restatement Secondfalls back on the commentary to the Uniform Commercial Code,which says that "extortion of a 'modification' without legitimatecommercial reason is ineffective as a violation of the duty of goodfaith."' 4 The Reporter's Notes to the Restatement Second cite Aus-tin v. Loral in support.' 5 In the case of the contractor who nowwants $150,000 to build the $100,000 house, the propriety of histhreat would depend on his reason-his threat might be improper ifhis desire for the extra $50,000 resulted from a suddenly acquiredtaste for expensive sports cars but not improper if it resulted fromhis having unexpectedly struck rock during excavation. The Re-statement Second, like the Code, would have courts distinguishamong such threats according to the reasons for making them.

Note that each of the improper threats just mentioned is athreat to do something one has no legal right to do-to commit acrime or a tort, or to break a contract. Can there be duress if theperson making the threat has a right to do the thing that he threat-ens to do? Courts have often said that such a threat cannot be du-ress. Thus the Supreme Court of Arkansas said in 1924 that "[I1t isnot duress to threaten to do that which a party has a legal right todo.", 6

10. See supra note 5.11. M. Puzo, THE GODFATHER 39 (1969). See also id. at 384, 400.12. See RESTATEMENT (SECOND) OF CONTRACTS § 176 (1981).13. Id. § 176(1)(d).14. Id. § 176 comment e, quoting UCC § 2-209 comment 2.15. Id., Reporter's Note to comment e.16. Ellis v. First Nat'l Bank, 163 Ark. 471, 474, 260 S.W. 714, 715 (1924).

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And yet this is clearly incorrect, as the Supreme Court of Ar-kansas itself recognized in 1938, when it decided Perkins Oil Co. v.Fitzgerald.7 Fitzgerald, a young man in his early twenties got a joboiling machines in an oil seed mill where his stepfather had workedfor some time. One day in August he caught his hand in a machineand, in attempting to extricate himself, caught his other hand. Fitz-gerald lost both arms at about the elbow. The following January,five months later, the mill asked Fitgerald to execute a release relin-quishing his claims against the mill for $5,000 (the limit of the re-sponsibility of the mill's insurer). Jasspon, one of the owners of themill, told him that if Fitzerald sued, counsel for the oil mill wouldbe able to delay any recovery for perhaps ten years; that if Fitzger-ald did not accept the $5,000 in settlement the oil company wouldfire Fitzgerald's stepfather and Jasspon would exert his influence tosee that the stepfather was not hired by any similar business; andthat Jasspon knew that Fitzgerald, his mother, and his brother (whohad an invalid wife) were all wholly dependent on Fitzgerald's step-father. This was an offer that Fitzgerald could not refuse, and heexecuted the release. Later, however, he sought to avoid it.

I assume that Jasspon had a right to do what he threatened todo. The stepfather's employment was surely terminable at willwithout cause, so his firing would not have been a breach of con-tract. And as long as Jasspon did not defame the stepfather, hisexercise of his influence to prevent his employment elsewhere wasprobably not tortious. Certainly the Arkansas Supreme Court didnot suggest that what Jasspon threatened would have of itself beenwrongful. Nevertheless, it allowed Fitzgerald to avoid the release.When can one's threat be said to be improper if one only threatenswhat one has a right to do? According to the Restatement Second,

A threat is improper if the resulting exchange is not on fair terms,and ... the threatened act would harm the recipient and wouldnot significantly benefit the party making the threat .... 18

Jasspon's threat was improper in this sense. Firing Fitzgerald's step-father would have harmed Fitzgerald without significantly benefit-ing Jasspon. The philosopher Robert Nozick has termed exchangessuch as that proposed by Jasspon "unproductive."

If I buy a good or service from you, I benefit from your activity; Iam better off due to it, better off than if your activity wasn't doneor you didn't exist at all .... Whereas if I pay you for not

17. See supra note 2.18. RESTATEMENT (SECOND) OF CONTRACTS § 176(2)(a) (1981).

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harming me, I gain nothing from you that I wouldn't possess ifeither you didn't exist at all or existed without having anything todo with me.' 9

Under the Restatement Second a threat that proposes such an un-productive exchange may be the basis for a claim of duress eventhough the person making the threat has a right to do what hethreatens.

The Restatement Second describes another situation in which athreat is improper even though the person making the threat has aright to do what he threatens:

A threat is improper if the resulting exchange is not on fair terms,and. . . the effectiveness of the threat in inducing the manifesta-tion of assent is significantly increased by prior unfair dealing bythe party making the threat ....

Suppose a situation in which the contractor has not yet made a con-tract with the landowner but has intentionally led him "down thegarden path" so far that the landowner had no practical alternativebut to rely on this contractor to build the house even if his bid is$100,000. At that point, the Restatement Second says, it is improperfor the contractor to exact an exchange that is not on fair terms.

This finds some support in another of Nozick's distinctions,under which a proposal is coercive if what is proposed is from thevictim's point of view worse than "the normal or expected" courseof events ("You won't get your daily dose of drugs if you don't signthe contract") or worse than the "morally expected" course of events("I will inflict my daily beating on you if you don't sign the con-tract").2' Nozick would reach the same result as the RestatementSecond in the example given since not building the house would, in

19. R. NozIcK, ANARCHY, STATE AND UTOPIA 84 (1974).20. RESTATEMENT (SECOND) OF CONTRACTS § 176(2)(b). See also id. § 176 comment f

(giving the example of "manipulative conduct during the bargaining stage that leaves oneperson at the mercy of the other").

Subparagraph (2)(c) states a third situation, one that will not be discussed here:A threat is improper if the resulting exchange is not on fair terms, and ... what isthreatened is otherwise a use of power for illegitimate ends.

21. See Nozick, supra note 8, at 112-13. Nozick would say that such a proposal is anoffer and not a threat at all. A substantial body of literature has developed over the philo-sophical question: Is an offer a threat? For the views of others, compare Bayles, A Conceptof Coercion, in NoMos XIV, COERCION 17 (1972) ("coercion... never involves a promiseof benefit"), with Held, Coercion and Coercive Offers, id. at 49 ("A person unable to spurn anoffer may act as unwillingly as a person unable to resist a threat."). On the relevance of thisquestion to the law of duress, see supra note 7.

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the circumstances, be worse than the "morally expected" course ofevents from the landowner's point of view.

But Nozick's test would include situations not included in theRestatement Second's. Suppose, for example, that the contractorhas built many identical houses for the owner, each for $50,000, andnow (with no inflation) insists on $100,000. Is it likely that a courtwould hold that a proposal to build a house for $100,000 was animproper threat because "the normal or expected" or the "morallyexpected" course of events was to build houses for $50,000? It doesnot seem so. As the commentary to the Restatement Second puts it:

Hard bargaining between experienced adversaries of relativelyequal power ought not to be discouraged. Parties are generallyheld to the resulting agreement, even though one has taken ad-vantage of the other's adversity, as long as the contract has beendictated by general economic forces.22

Thus, though the Restatement Second may find support in Nozick'sformulation, it does not cast as wide a net.

In passing judgment on these more marginal cases of improperthreats, keep in mind that duress-unlike misrepresentation-givesno claim to damages. The only consequence of concluding that athreat is improper and therefore the basis for a claim of duress is toallow restitution upon avoidance of the contract or, as John Dawsonsummarized it, "to cancel out advantages secured by superior bar-gaining power."23 Furthermore, note that in these marginal cases(as opposed to threats to commit crimes or torts or to break con-tracts) the Restatement Second imposes an additional requirementfor an improper threat that the resulting exchange be one that is noton fair terms.24 To a limited extent this counterbalances the Re-statement Second's general expansion of the concept of an "im-proper threat."

Third, when does a threat induce the manifestation of assent?What is required here is simply causation. Did my threat to twistyour arm actually induce you to sign the contract or would you havesigned it anyway? Did the subcontractor's threat to break the sub-contract actually induce the general contractor to agree to the modi-fication or would it have agreed anyway?

Fourth, when is a threat sufficiently grave to justify the victim

22. RESTATEMENT (SEcoND) OF CONTRACTS § 176 comment f (1981).23. Dawson, Economic Duress-An Essay in Perspective, 45 MICH. L. REv. 253, 287

(1947).24. RESTATEMENT (SECOND) OF CONTRACTS § 176(2) (1981).

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in succumbing to it? The early common law imposed a very stricttest. According to Lord Coke, in the early part of the seventeenthcentury, the victim might avoid a contract only

for fear of losse of life .... of losse of member, . .. of mayhem,and . . .of imprisonment; otherwise it is for fear of battery,which might be very light, or for burning of his houses, or takingaway, or destroying of his goods or the like, for there he mayhave satisfaction in damages.25

(Note that it is not entirely clear that Coke would have consideredmy threat to break your arm-as opposed to my threat to break itoff-sufficient.) This strict view was echoed as late as 1856 in Burr v.Burton, the earliest Arkansas duress case that I have been able tofind, in which it was said that there must be a threat that "excites afear of some grievous wrong, as of death, or great bodily injury, orunlawful imprisonment. 2 6

But the notion that the victim of a threat to property might al-ways be expected to refuse assent and resort to an action for dam-ages began to give way in the eighteenth century with therecognition of "duress of goods," the wrongful detention of the vic-tim's property. This presaged a major change in the doctrine of du-ress and paved the way for the more liberal doctrine of economicduress in cases like Austin v. Loral and Perkins Oil Co. v. Fitzgeraldin which the threat goes to the victim's economic interests ratherthan to his person or his property. In the course of this expansion ofduress, courts have had great difficulty in formulating the standardto be applied. The early common law imposed a stubbornly objec-tive requirement that the threat be sufficient to overcome the will of"a person or ordinary firmness"27 or-as an Arkansas judge ex-pressed it just over a century ago-"A man or person of ordinarycourage.'28 The pendulum then swung to a more subjective stan-dard under which the threat need only have deprived the particular

25. E. COKE, SECOND INSTITUTE 482-83 (1642).26. 18 Ark. 214, 233 (1856).27. 1 W. BLACKSTONE, COMMENTARIES* 131 (1765), relying on 2 H. BRACTON, ON THE

LAW AND CUSTOMS OF ENGLAND 65 (Thorne tr. 1968) ("nor is it the fear of the weak andtimid, but such as may occur in a resolute man"). For an application of the test, see King v.Lewis, 188 Ga. 594, 4 S.E.2d 464 (1939) ("overcome the mind and will of a person of ordi-nary firmness").

28. Bosley v. Shanner, 26 Ark. 280, 281 (1870) (approving jury instruction that threatmust suffice to "excite the reasonable apprehensions of a man or person of ordinary cour-age"), quoted with approval in Fonville v. Wichita State Bank & Trust Co., 161 Ark. 93, 96,255 S.W. 561, 562 (1923).

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victim of his "free will." 29 Difficulties in giving meaning to the term"free will" have now caused the pendulum to swing back to anothermore objective standard under which the threat must have left theparticular victim-as the Restatement Second puts it-"no reason-able alternative."

30

From what I have said so far, you can see that the expansion ofthe doctrine of duress is due primarily to the liberalization of two ofthe four requirements: the second (that the threat be one that thelaw condemns) and the fourth (that the threat be sufficiently graveto justify the victim's assent). Now I turn to the effect of this expan-sion on two doctrines that are allied to duress: undue influence andthe pre-existing duty rule. I call these doctrines "allied" rather than"related" to duress because though, like duress, they may be used togive relief against coercive practices, they have very different ances-tries. Let us look at the first of these three allied doctrines, undueinfluence.

Whereas the concept of duress grew up in courts of law, that ofundue influence developed in courts of equity, a distinction thatmay be of special interest in Arkansas, since it still has courts ofequity. The purpose of the concept of undue influence was to giverelief to victims of unfair transactions that were induced by im-proper persuasion. In contrast to duress, the essence of which wassimple fear induced by threat, the equitable concept of undue influ-ence was aimed at the protection of those afflicted with a weaknessthat fell short of incapacity against improper persuasion that fellshort of misrepresentation or duress by those in a special position toexercise such persuasion. Two elements are commonly required:first, a special relation between the parties; second, improper persua-sion of the weaker by the stronger.3 1

Traditionally, the special relation is one of trust or confidencethat justifies the weaker party in assuming that the stronger will notact in a manner inconsistent with his welfare. Examples include therelations between parent and child, husband and wife, clergyman

29. Winget v. Rockwood, 69 F.2d 326, 330 (8th Cir. 1934) ("the ultimate fact in issue iswhether such person was bereft of the free exercise of his will power"); Austin InstrumentCo. v. Loral Corp., 29 N.Y.2d 124, 272 N.E.2d 533 (1971) (threat deprived victim of "its freewill"); see RESTATEMENT (FIRST) OF CONTRACTS (1932) § 492(b) ("precludes him from ex-ercising free will and judgment").

30. See supra note 5.31. See RESTATEMENT (SECOND) OF CONTRACTS § 177(1) (1981) ("Undue influence is

unfair persuasion of a party who is under the domination of the person exercising the per-suasion or who by virtue of the relation between them is justified in assuming that thatperson will not act in a manner inconsistent with his welfare.")

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and parishioner, and physician and patient. But some courts haveextended the protection afforded by the doctrine beyond relations oftrust and confidence to those in which the weaker party is for somereason under the domination of the stronger.

Once the requisite relation is shown, it must then be shown thatthe assent of the weaker party was induced by unfair persuasion onthe part of the stronger. What will be characterized as "unfair" de-pends on a variety of circumstances, but the ultimate question iswhether the result was produced by means that seriously impairedthe free and competent exercise of judgment, and a particularly im-portant factor in showing unfairness in persuasion is imbalance inthe resulting bargain.

The use of the doctrine of undue influence to give relief fromcoercion can be seen from the Odorizzi case.32 Odorizzi was aschool teacher who alleged that after he had been arrested on crimi-nal charges of homosexual activity, questioned by the police,booked, released on bail, and gone for forty hours without sleep, thesuperintendent of the school district came to his apartment to askfor his resignation. The California District Court of Appeal notedthe possibility "that exhaustion and emotional turmoil may whollyincapacitate a person from exercising his judgment" and held thatthe pleadings sufficed to show the required relation of "a dominantsubject to a servient object. '3 3 It concluded that

the representatives of the school board undertook to achieve theirobjective by overpersuasion and imposition to secure plaintiff'ssignature but not his consent through a high-pressure carrot-and-stick technique-under which they assured plaintiff they weretrying to assist him, he should rely on their advice, there wasn'ttime to consult an attorney, if he didn't resign at once the schooldistrict would suspend and dismiss him from his position andpublicize the proceedings, but if he did resign the incidentwouldn't jeopardize his chances of securing a teaching postelsewhere.34

The court held the resignation voidable on the ground of undueinfluence.

A court could equally well reach the same result, however,under the Restatement Second's expanded doctrine of duress. Theliberalization of the requirement that the threat be one that the law

32. Odorizzi v. Bloomfield School Dist., 246 Cal. App. 2d 123, 54 Cal. Rptr. 533 (1966).33. Id. at 131, 54 Cal. Rptr. at 540.34. Id. at 135, 54 Cal. Rptr. at 543.

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condemns would permit the court to find that the school board'sthreat to publicize any proceedings against Odorizzi and hurt hischances of obtaining another job was an improper one on theground that doing so would harm Odorizzi and would not signifi-cantly benefit the school board. And the liberalization of the re-quirement that the threat be sufficiently grave to justify the victim'sassent would permit the court to conclude that Odorizzi had no rea-sonable alternative but to resign in the face of the improper threat.

It is therefore a likely consequence of the liberalization of therequirements of duress that courts and litigants will place more em-phasis on the coercive nature of transactions that were previouslysubject to attack only on the grounds of undue influence. The doc-trine of duress may, in the long run, swallow up much of what haspreviously been considered to be undue influence.35

A second doctrine allied with duress is the pre-existing dutyrule, an aspect of consideration. Under the rule, a party's perform-ance of a duty that he already owes under a contract cannot be con-sideration for a promise by his cocontractant 6 Nor can a party'spromise to perform such a duty be consideration for a promise byhis cocontractant. In practice, the rule has often played an impor-tant role in connection with contract modifications obtained bycoercion.

For a simple example, recall the case of the contractor whoagreed to build a house for $100,000. Suppose that, after work hasbegun, he threatens to walk off the job unless the landownerpromises to pay an extra $50,000. The landowner, in urgent need ofthe house and dispairing of finding another contractor quickly,promises to pay the extra $50,000 in return for the contractor'sfinishing the work. But on completion of the house, the landownerrefuses to pay more than the original $100,000. Is the modificationenforceable so that the contractor can recover the additional sumfrom the owner?

35. For a suggestion that the doctrine of undue influence is also in danger of beingswallowed up by that of unconscionability, see Eisenberg, The Bargain Princile and its Lim-its, 95 HARV. L. REV. 741, 775-76 (1982) (discussing the Odorizzi case as one under the"doctrine of unfair persuasion," an aspect of "the principle of unconscionability"). Eisen-berg also suggests that the doctrine of duress may be in similar danger. Id. at 799 ("duressmay now be seen as simply a special case of the exploitation of distress," also an aspect of"the principle of unconscionability"). It seems unlikely, however, that this fate will befallsuch a well-established doctrine designed to deal with coercive behavior, a cardinal abuse ofthe bargaining process--or, for that matter, that it will befall the comparably entrencheddoctrine of misrepresentation.

36. RESTATEMENT (SECOND) OF CONTRACTS § 73 (1981).

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A natural response would be to analyze the problem in terms ofduress. It is only relatively recently, however, that the common-lawdoctrine of duress has been broadened to encompass such situationsof "economic duress." The traditional analysis of the problem pro-ceeds in terms of the doctrine of consideration. Under that doctrinethe owner would prevail on the ground that there was no considera-tion for his promise. All that the contractor did in return for thenew promise--of $50,000 more-was to perform a duty that heowed under an existing contract, and under the pre-existing dutyrule, performance of such a duty is not consideration.

Note, however, an important limitation of this rule-the pre-existing duty rule merely makes the landowner's promise to pay theextra $50,000 unenforceable for lack of consideration. It does notgiv: the landowner a power of avoidance. If the landowner has al-ready paid the contractor the $50,000 (as had the general contractorin Austin v. Loral), the contractor can simply keep the money. Thepre-existing duty rule gives the landowner no right to get it backonce he has paid.

Courts have become increasingly hostile to the pre-existingduty rule. Though it serves in some instances to give relief to apromisor who has been subjected to overreaching, it serves in otherinstances to frustrate the expectations of a promisee who has fairlynegotiated a modification. It does not, for example, distinguish be-tween the situation where the contractor's demand for more moneyis motivated merely by opportunism and greed and that where thedemand is prompted by the discovery of circumstances or the occur-rence of events that make the contractor's performance more bur-densome. Thus the rule would deny the contractor recovery of theadditional $50,000 regardless of whether his demand for it had beenprompted by the unexpected discovery of rock which had made histask much more burdensome or by a suddenly acquired taste forexpensive sports cars.

It is therefore not surprising that both courts and legislatureshave made considerable inroads into the rule. Restatement Secondsection 89 undercuts the rule by providing:

A promise modifying a duty under a contract not fully performedon either side is binding (a) if the modification is fair and equita-ble in view of circumstances not anticipated ... when the con-

37tract was made. ...

37. Id. at § 89(a).

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The Restatement Second thus distinguishes the contractor who hasstruck rock from the contractor who has acquired a taste for expen-sive sports cars, laying down a test that approaches that of "goodfaith and fair dealing" it lays down for duress by a threat to break acontract.38

Is it not likely to occur to courts to take the next step by aban-doning the pre-existing duty rule entirely and using the expandeddoctrine of duress to protect parties against coerced modification?39

It is true that a party claiming duress must show that the threat wassufficiently grave to justify his assent, a burden that is not imposedon him by the pre-existing duty rule. On the other hand, a partywho can show duress has an advantage in that he has not only adefense if he is sued by the other party but also a ground for avoid-ance and restitution.

This result has already been achieved by the Uniform Com-mercial Code. Under UCC 2-209(1), "An agreement modifying acontract within this Article needs no consideration to be binding."Thus the pre-existing duty rule is abolished. Nevertheless, as waspointed out earlier, a requirement of good faith and fair dealing isimposed and "extortion of a 'modification' without legitimate com-mercial reason is ineffective as a violation of the duty of goodfaith."'40 Thus the expanded doctrine of duress is invoked to protectparties against coerced modifications. 4'

I come, therefore, to two conclusions. The first is that the Re-statement Second reflects the "progressive tendency" toward expan-sion of the doctrine of duress, in its liberalization of both therequirement that the threat be one that the law condemns and therequirement that the threat be sufficiently grave to justify the vic-tim's assent. The second is that it is not unreasonable to expect thisexpanded doctrine of duress to encroach on the doctrine of undueinfluence and to displace the pre-existing duty rule.

38. See supra text at note 13.39. See Hillman, Policing Contract Modofcations under the UCC: Good Faith and the

Doctrine of Economic Duress, 64 IowA L. REV. 849 (1979).40. See supra note 14.41. Though the Code has no explicit requirement that the threat to break the contract

be sufficiently grave to justify the victim's assent to the modification, it would make sense toinfer a requirement that the threat leave the victim no reasonable alternative.

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